Road Tax & Vehicle Registration Tax (VRT)

Non-Technical Option | Specific Example
Air | Climate | Climate & Air | Transport

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National governments can design or amend existing motor tax systems and vehicle registration taxes such that the tax paid more closely reflects the greenhouse gas emissions, notably that of CO2, with each vehicle type. Such an approach would provide consumers with an incentive to choose fuel-efficient cars with lower CO2. As the Irish transport sector is not covered by the EU emissions trading scheme (EU ETS) the Government’s transport policy suite has been expanded to include a number of measures in an effort to control and reduce rising sectoral emissions and to encourage a switch toward more efficient vehicles. One of the most significant transport behavioural measures identified in the national climate change strategy is Government use of the taxation system. The climate change strategy notes that the taxation system can make a contribution to reducing greenhouse gas emissions by encouraging behavioural change or investment in energy efficient technology (DoEHLG, 2006).This resulted in the Government amending the vehicle registration tax (VRT) and motor tax systems to a tiered system reflecting the vehicle CO2emissions rating.


The Irish government amended the vehicle registration tax and annual motor road tax systems to make them CO2 compatible with effect from July 2008. From the 1stof July 2008 onwards Irish vehicle registration tax and annual motor tax are calculated on the basis of the CO2emissions associated with vehicles. Prior to July 2008 motor tax was calculated on the basis of vehicle engine size instead of the traditional approach that was based on engine size – the more powerful your vehicle, the higher the cost of your motor tax.

The Irish government created seven emission/tax bands with the vehicle registration and motor tax payable determined by the relevant emission/tax band for each vehicle. To assist motorists in making an informed decisions about the CO2efficiency of various vehicle types the Society of the Irish Motor Industry (SIMI) provides details on CO2emissions for all new vehicles for sale in Ireland. Table 1 provides information on the CO2reflective vehicle registration tax and motor tax rates

Table 1 Irish Vehicle Registration Tax (VRT) and Motor Tax Rates

Emission/Tax Band

CO2 Emissions (CO2/km)


Motor Tax Rate


0 – 120G




>  120g/km up to and including 140g/km




>  140g/km up to and including 155g/km




>  155g/km up to and including 170g/km




>  170g/km up to and including 190g/km




>  190g/km up to and including 225g/km




>  225g/km



It is important to note that there are a number of vehicles which are excluded from the above process. These vehicles include:

  • State-owned vehicles
  • Diplomatic vehicles
  • Vehicles exempted under the Disabled Drivers and Disabled Passengers (Tax Concessions) Regulations, 1994 (S.I. No. 353 of 1994)
  • Vehicles (including any cycle with an attachment for propelling it by mechanical power) not exceeding 400 kilograms in weight (unladen), which is adapted and used for invalids
  • Vehicles which are used exclusively for the transport (whether by carriage or traction) of lifeboats and their gear or any equipment for affording assistance towards the preservation of life and property in cases of ship-wreck and distress at sea
  • Vehicles which are used exclusively for the transport (whether by carriage or traction) of road construction machinery used for no purpose other than the construction or repair of roads
  • Refuse carts, sweeping machines or watering machines used exclusively for cleansing public streets and roads
  • Ambulances, road-rollers or fire engines
  • Vehicles kept by a local authority and used exclusively for the purpose of their fire brigade service.
  • Vehicles which are used exclusively for mountain and cave rescue purposes
  • Vehicles which are used exclusively for underwater search and recovery purposes.


The expected impact of a new CO2based motor tax and VRT system is that it would encourage motorists to switch to more CO2efficient vehicles. Such a move would expect to result in a decrease in the COintensity and direct CO2 emissions of the vehicle stock in addition to the ancillary benefits associated with reduced CO2emission levels.

In regard to vehicle stock, shifts toward diesel and smaller vehicles would be anticipated. The former may have some associated impacts for particulate emissions.

Costs & Benefits

Motorists driving large CO2 intensive vehicles will be forced to pay for this privilege in the form of higher tax rates.

Motorists will be incentivised to purchase more energy efficient vehicles

A shift towards diesel vehicles (higher efficiency) may lead to a related increase in particulate emissions.

Evidence & Reference

Detailed description of the modalities of Irish motor and vehicle registration tax
Revenue - Irish Tax & Customs

The Society of the Irish Motor Industry (SIMI)

Department of Environment Heritage and Local Government (DoEHLG), 2009. Vehicle Labelling. Dublin
DoEHLG-Vehicle Labelling

Department of Environment Heritage and Local Government (DoEHLG), 2006. Ireland’s Pathway to Kyoto Compliance: National Climate Change Strategy Ireland. Dublin.

Modelling this Measure

Within a given modelling framework the effects/impacts of motor tax and VRT changes can be captured through their impact on a number of key modelling parameters:

  • Activities­– the degree to which the implementation of a CO2 based motor tax system reduces energy consumption across the economy through increased vehicle efficiency, net of any rebound effect.
  • Technology Change– the degree to which the introduction of CO2 based motor tax and VRT leads to a shift to more CO2 efficient vehicles.
  • Costs– the financial costs associated with drivers continuing to drive large CO2 intensive vehicles.
  • Benefits– with a new CO2 based motor tax and VRT system leading to a switch to more CO2 efficient vehicles that consume less energy there will be an associated change in emission levels.
  • Utility– the degree to which the motor tax and VRT system impacts on a household’s financial well-being as a result of reduced private car tax expenditure following a switch to a more CO2 efficient car.

Site Entry Created by J A Kelly on Jul 29, 2010

Reference This Source (2019). Road Tax & Vehicle Registration Tax (VRT). Available: Last accessed: 24th April 2019

Reader Comments

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Posted by Andrew on 30 July 2010 at 09:51 AM

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